TAKE CHARGE OF YOUR MONEY
Are you financially healthy?
INQUIRER.net
First Posted 09:45:00 08/05/2008
Filed Under: Personal Finance
(This is part of Take Charge of Your Money , a partnership between INQUIRER.net and Citibank to help readers handle their personal finances well.)
Question: I’m turning 40 soon and I’m planning a “life makeover”. For one, I’ve resolved to eat healthier food and exercise more. I would also like to pay more attention to my finances and see if I’m doing the right thing. Is there a “financial checkup” I can avail of? – Sarah
Answer: As you celebrate a milestone in your life such as turning 40, it’s good that you feel the need to stop and take stock of what your life has been like so far. We all need time to look back and see where we have gone, where we need to go, and find out what we should do to reach our goals.
In terms of finances, there is indeed a “financial checkup” you can easily take to help you assess your financial standing. It’s the Citi Fin-Q, a survey assessing your financial quotient or Fin-Q, which you can take online for less than five minutes at www.citibank.com.ph.
In October last year, Citibank, through Australia-based CxC Consulting, asked 400 respondents each from Australia, China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand to take a survey online. These respondents were between 18 to 40 years old, and either had a bank account or a credit card.
They were asked 11 questions about their financial well being, from their attitude toward their finances to budgeting, saving, and financial planning. The maximum possible score is 100.
It is interesting to note that Filipinos scored an average of only 47.8 points in their Fin-Q. Sixty-two percent of the respondents scored less than 50. In addition, survey results showed:
1. Budgeting is not a habit. Less than four out of 10 Filipinos have a monthly budget and stick to it.
2. Insurance is not a priority for everyone. Three out of 10 Filipinos have no insurance (life and non-life), leaving them vulnerable to financial crises.
3. Saving is not automatic. Less than four out of 10 Filipinos set aside or save money every payday.
4. Retirement is way out of their radar. Only one out of 10 Filipinos is consciously saving up for retirement. The rest have not started planning, don’t have an idea how much they need for retirement, or have some savings but don’t know if they are enough.
5. We tend to look to our family for help. About five out of 10 said they would need assistance from their adult children when they retire.
6. Savings are not enough. On average, Filipinos have about nine weeks’ worth of savings. If one loses his job today and still has to pay for his regular day-to-day expenses, his savings will be wiped out in nine weeks.
Signs of a financially healthy person
The Fin-Q is a helpful tool to find out where you stand, and what you should work on. Based on the survey, here are the signs of being financially healthy:
1. Having a monthly budget you stick to. It’s easy to spend left and right when there’s still money in your wallet or when you happen to have your credit card with you always. But doing so will leave you with barely enough to live on at the end of the month or when a crisis happens. Start a budget. Set aside money for savings then put a limit on your spending.
2. Saving as soon as you get paid. Some people save only when there’s money left at the end of the month after other expenses have already been incurred. Others only save when they get a financial windfall, such as a bonus. Make savings a monthly habit by taking off at least 10 percent of your paycheck before you spend the rest of it. Put this in a savings account, and transfer to higher yielding investments later.
3. Paying your credit card bill on time. Every purchase charged to your credit card is a debt you have to pay. Always pay on time to avoid getting penalized with finance charges for late payments. Also, if possible, pay your credit card bill in full so as to save on interest charges. If this is not possible, pay what you can. Bear in mind, though, that if you keep paying just the minimum amount, you will be incurring a lot of interest expense and it will take you a long time to get out of debt. The best thing to do is to charge only what you can afford to pay so you won’t have a hard time paying off your debt.
4. Having adequate insurance coverage. If people are dependent on you for support, it makes sense to take out life insurance so they will be cushioned from financial problems if something happens to you. Also, take insurance coverage for your and your family’s health, and insurance to protect your assets.
5. Having a retirement plan. We cannot always depend on our adult children to take care of us someday. Find out how much you need to have a comfortable lifestyle at retirement, and plan out how to achieve that. A financial planner may be able to help you.
It’s never too late or too early to take steps to be financially healthy. Start today!
(INQUIRER.net and Citibank invite readers to ask questions regarding financial matters. Send your questions to personal_finance@inquirer.net or comment through our personal finance blog called MoneySmarts)
*Disclaimer: Readers are solely responsible for their own investment decisions and should thus conduct their own research and due diligence and obtain professional advice. INQUIRER.net will not be liable for any loss or damage caused by a reader's reliance on information obtained from our web site. INQUIRER.net receives no compensation of any kind from companies or industries or funds that are mentioned here.
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